Neil Patel asks 10 successful entrepreneurs who have all created companies that are worth at least 50 million dollars, what their biggest business mistake was.

Half of the ten named a hiring related issue as their biggest problem.

If you feel you need information to emphasize the crucial importance of effective recruiting, look no further. Hiring is important for all companies, but for start-up companies it is the bedrock that will determine the success or failure of your endeavor. One mistake with a core team hire can throw the company into a death spiral from which it may not recover. The other take away from this advice is that once you identify a hiring mistake, you must correct it quickly or risk further damage.

“wrong hiring standards in certain parts of our company. We focused too much on specific skills, and too little on fundamental abilities, raw talent, and passion”

“The biggest mistakes are always bad hires.”

“My biggest mistake has been hiring the wrong people.”

“not taking fast corrective action in dealing with a bad hire.”

“The biggest mistake I’ve made have been with hiring the wrong people. I think if you add everything up, including the cost of bad decisions, additional bad hires made by the original bad hire, and missed opportunity costs, bad hires have cost Zappos over $100 million.”

Read the blog post to see who said what.

The best advice when building your team is to err on the side of caution. If you have any doubts about someone, don’t hire them. Wait for the right candidate to come along.

To do this effectively, you must be recruiting at all times and use a lot of sources (including recruiters). It costs you nothing to see candidates from recruiters and if the candidate presented by the recruiter is the “right” one and beats those provided by your other sources, hire them. Too much emphasis is placed on cost per hire and you should be focused on quality of hire. Each good engineer is considered to be worth $ 1 Million in an acquisition (not even considering their output) so whatever it costs you to bring a great candidate on board is well worth it.

We have just added the capability for our registered users to receive a weekly email of the newest job postings. You can set up the filtering based on Position Category, Industry, Company Stage as well as keep a very tight screen if you only want to passively view jobs from companies in your network.

You can set up to receive the email and manage the criteria from your Profile page.

If you aren’t registered, it only takes a minute to Signup with an email address and enter your company history. talentGraphz offers total anonymity and none of your information is available to any company or individual. We are not like some other professional networking sites where it feels like you have joined a hunting preserve and you are the prey.

Let us know what you think. Right now talentGraphz only covers the Boston Emerging Technology market, but we have plans to expand to other geographies in 2010.

Most people interested in Social Networking, whether professionally, academically or as a user, are familiar with the concept, “the strength of weak ties”. The paper of the same name by Mark S. Granovetter of Johns Hopkins University issued originally in the early 70’s and updated in 1983, analyzing social networking has been very influential in the field and I believe, is responsible for some miss-conceptions regarding how jobs are found.

Although not specifically stated in Granovetter’s paper the generally accepted conclusion on job mobility reached by many, is the following; most people find jobs through people with whom they don’t have a strong relationship.

Having been a recruiter for almost twenty years, experience tells me that this is contrary to what actually occurs when an individual changes jobs. In this opinion article I endeavor to uncover a new perspective. I will also identify problems with the methodology that led to conclusions that do not reflect practicality, as well as use real world examples to support the counter-argument that it is, The Strength of “Work” Ties, that facilitates mobility in the job market.

Labor Market Studies and Empirical Data

Once the concept of the “Strength of Weak Ties” had developed, empirical data was gathered to further develop the cohesive power of weak ties. One of the underlying suppositions for the labor market study was the idea that those with strong ties to the job seeker would be more motivated to help with the job search.

In 1970 Granovetter studied how people in professional, technical and managerial positions found their new jobs. Particular emphasis was placed on the nature of the tie between the job changer and the source of the employment opportunity. By asking a random sample of one hundred individuals who found jobs through contacts, how often they saw the contact around the time of the job change, and using contact frequency to determine tie strength, he was able to offer some conclusions.

The results:

Sample Size 100 individuals

% of Sample Tie Strength Contact Frequency Definition

16.7 % strong ties = often=at least twice a week
55.6% occasionally => once a year but <>
27.8% weak ties rarely= once a year or less

From these results he concluded, ”the skew is clearly to the weak end of the continuum, suggesting the primacy of structure over motivation.” Or in other words, most of the individuals found jobs from weak ties and strong ties are not as important as weak ties for finding a job.

Heuristics are the Problem

First of all, a study with such impact on the thinking regarding job mobility seems like it should be based upon more than a sample of only one hundred individuals.

This opinion essay recasts the study with a focus on professional networking related to job change. Granovetter’s use of “professional networking” examples to reflect social networking phenomena creates one of the basic problems with the SWT study. Proximity has been identified as a factor when establishing strong ties in a social network. It makes sense that people that see each other more frequently have a higher probability for forging a strong tie. Movement within social networks tends to be gradual unless one uproots. In a social network, once proximity is not a factor the ties diminish in strength. I argue that Professional networks are different because movement is abrupt from one company to another yet the strong ties remain in spite of lack of contact and proximity.

Another factor that makes professional networking much different from social networking is that much more is at stake. When you are a reference for someone, your reputation will be affected by that reference and therefore has more consequence than just passing on information. I think we can all agree that how someone finds a new job is not exactly the same as how the rumor of Sinbad’s death diffuses through a social network.

Definition of Strength

Another problem is that the definition of a strong tie is applied arbitrarily and the resulting determination is the exact opposite of what a strong tie is in a professional networking context.
First, let’s start with the problematic method used in the study to define the “strength” of a tie. Granovetter’s definition initially uses the concept of time, frequency of contact, emotional intensity, mutual confiding and reciprocal services, as criteria to determine the strength of a tie. Then for no apparent reason in the labor market study, which is responsible for most of the data used to support his arguments, uses only the contact frequency to determine the strength of ties. As we will see, in a professional networking scenario, frequency of contact does not determine a strong tie. Therefore, strong ties may be mistakenly defined as weak, which produces incorrect conclusions.. In general my intuitive notions do not agree with the criteria related to time and contact frequency with respect to tie strength. I have close friends that I see or contact very infrequently, yet they remain strong ties.

I propose it may be much easier to define and determine the strength of ties in a professional networking context. In this analysis, I am using referral as the defining criteria. For example, would individual A refer B? If so, a strong tie exists. Furthermore, using the concept of transitivity, if A has strong ties to C and refers B to C, we will infer that B has a strong tie to C. A weak tie occurs when A knows B but does not refer them. This is not necessarily a negative; it may also be due to lack of sufficient knowledge about B’s performance etc.. Staying true to the comparison to Granovetter’s paper, I will stick with the two qualities of ties, weak and strong. However, our experience reveals the following data points of interest. If we continue outward to the next degree of connectivity we find that the strength of the tie attenuates somewhat and that beyond three degrees does not register. The significant data point being that a referral of D from A to B to C is less than a strong tie, but stronger than a weak tie.

Common sense and experience tells us that time spent with an individual and frequency of contact are not much of an issue when determining strength of a tie based upon referrals. Certainly a reference of A for B from ten years ago is not as strong as one currently, but taken in context between strong ties A-C, it is still considered a strong tie for C -B.

Lack of contact with a former colleague for a few years, does not diminish the strength of your referral. For example, someone that worked with Ray Ozzie four years ago, yet has had no contact since, will likely give just as strong a referral as someone with whom Ray works currently. As a corollary, the best people you work with are not necessarily the ones you frequently hang out with, and some might suggest that the amount of time one spends around the “water cooler” is inversely proportional to the quality of the individual.

The remaining criteria, emotional intensity, mutual confiding and reciprocal services would still apply when using referencing to determine the strength of tie in a professional context.

The “Strength in Numbers” of Weak Ties

An obvious explanation for the preponderance of weak ties job changes would be the greater number of weak ties. If your five close friends know of three jobs between them, but their friends and friends of friends know of thirty, then the probability is good that the job will be found through weak ties. Certainly this is more of a factor when a job must be found in a short amount of time. A footnote in Granovetter’s paper notes that David Light brought this mathematical fact to his attention. However, Granovetter maintains that the objection remains inconclusive, and that “if the premise were correct, however, one might still expect that greater motivation of close friends would overcome their being outnumbered.” As we proceed, I believe that the analysis will substantiate David Light’s suggestion regarding “the strength in numbers of weak ties” and also that strong ties do overcome weak ties when changing jobs.

The Strength of Weak Ties Concept does not reflect reality

Conservative Industry estimates indicate that in the US there are at least 50 million hiring situations annually and 40% of these hires are made through referrals.

When you refer someone, you have skin in the game. Your reputation is on the line and therefore you do not make it lightly. Chances are you are not going to refer someone you do not know well.

This one industry statistic alone is probably enough to convince you that the conclusions drawn from asking the wrong question to one hundred job changers may not be more accurate than data derived from the more than 50 million job changes annually.

An Alternative View

If we reframe Granovetter’s labor market study by asking the job changers the more relevant question, “Was the job source referring them?” we might see different results. Examining the amount of contact we currently have with our references from past jobs, probably most would fall into the once a year or less category. Yet when looking for a new position, the first step is to contact your past network of references and referrals.

Ask any hiring manager what their process is to find and hire people and you will get similar answers. The first step is to vet their network and the network of their employees. If they utilize other recruiting sources and a viable candidate has been identified, backdoor referencing is done. In essence, using these unofficial references, the manager is attempting to bring the candidate into their network of strong ties. Managers try to avoid making a hiring decision based solely on interviews and official references. It is much easier to hire a candidate verified through your network.

Think back to your ten friends that have most recently changed jobs. How did they find their jobs? Chances are, they found the job using their network of work contacts that are references or would refer them. Many times I have seen a past manager that was called to be a reference, make an offer to the candidate seeking the reference. In some cases, B’s referral from contact A to A’s reference C, led B to a job with C. As I have noted, due to transitivity, that would still be considered a strong tie move.

Granovetter said it best, “In many cases, the contact was someone only marginally included in the current network of contacts, such as an old college friend or a former work mate of employer, with whom sporadic contact had been maintained (Granovetter 1970, pp. 76-80). For work-related ties, respondents almost invariably said that they never saw the person in a non-work context. It is remarkable that people receive crucial information from individuals whose very existence they have forgotten.”

How true. People will make referrals even when they have not been in frequent contact. In my experience it is not remarkable, in fact I have had managers hire the same person from me several times due to losing contact with the individual. There is no stronger tie in a professional network than when a manager hires someone again after moving to another company.

Conclusion

In my opinion, The Strength of Work Ties is the major factor in job mobility. References and Referrals are the most powerful conduit for finding and landing a new job.

Opportunities found using this method have a higher probability of fit due to the similarity that exists between individuals with strong ties. This similarity will include the quality of the individuals work output. A common phrase in the recruiting industry is that A’s refer A’s. The likelihood of being hired through strong work ties is increased due to the best fit, the motivation of the internal reference and the lessened risk provided to the manager.
For the same reason, positions found through strong work ties have a higher probability of job satisfaction and longevity.

Respectfully, The Strength of Weak Ties, does play a role in job mobility, but the value lies in the larger number of opportunities available to the individual seeking a new position. This is especially true when there is a lack of references or the individual is pressed for time to make a move.

55% of employees polled plan to make a career change or go back to school when the economy recovers.

This means companies will be hiring next year as the people that were hunkered down waiting out the downturn move to the companies hiring for growth, and the less attractive companies will be hiring to replace attrition.

Either way, companies should be preparing to scour their talent pools for those receptive to considering a move.

In the survey, forty-seven percent of hiring managers cited under-qualified applicants as their most common hiring challenge, followed by the reluctance of qualified candidates to leave secure positions (22 percent).

What we will see is an even greater discrepancy as things pick up, between the companies doing well and the ones not so fortunate. For the more attractive opportunities, the percentage of qualified candidates will go up along withl the competition for them, as people initiate the job change they have been contemplating for six months. The good candidates that are on the street will be quickly absorbed when the market turns. Thus leaving the less attractive companies that are backfilling attrition with an even harder task of finding qualified candidates.

The message here is clear, start making preparations to address your hiring needs for 2010.

Do you really need that 7 page form from your ATS vendor? Don’t you kinda have to be desperate to fill that out in the first place? You might want to rethink a process that is so laborious.

Do you want to continue to advertise on job boards or will the newer trend toward Pay for Performance make more sense for you?

How are you leveraging your employee networks to reach candidates with a higher probability of a match?

Whatever means and tools you have in your satchel, dust them off and get ahead of the game.

Do you think this survey reflects conditions in your market? let us know…

Eric Ries came to Boston for a talk at MIT on Nov 19th. Approximately 250 attendees came to see Eric and learn about the Lean Startup methodology.

We would like to thank the organizations that made this possible, and in doing so, demonstrated their commitment to start-ups and the innovation economy here in Boston.

Hosted By

Platinum Sponsor

from Polaris Venture Partners

Gold Sponsors

AV Sponsor

Atlas Venture hosted a mixer afterward that was attended by many in the start-up community. The free beer and appetizers went quickly. Eric Ries was kind enough to come and meet the audience and hang out for a while.

Many thanks to Eric for making the trip to Boston, which we hope will be the first of many.

At Genotrope, we have recently seen a different type of candidate exploring available opportunities . These candidates are proven producers and will have multiple options to choose from when they change jobs. These candidates can afford to be picky.

In the past year, pent up curiosity has taken a back seat to keeping your head down and powering through the crash of 2008, but as we slowly emerge from the downturn, so do people looking for their next new opportunity.

Remember how the tide turned in 2004 and there were more positions to fill than available candidates?

Take a look at this chart of VC investment from 2001 to 2009 from a post by Fred Wilson. Venture Investing Chart from AVC See how the ramp is much steeper coming off the bottom this time? Does this mean the market will turn even faster and go from a more normal market to one of a scarcity of quality candidates much quicker? I don’t know, but I do know that companies should understand that things are going to change and make the adjustments required to adapt to the new market conditions.

If you remember what happened in 2004 ish, the pent up desire to make a job change resulted in a massive shift left as 20% or the best and more frustrated employees moved to greener pastures. In the coming upturn, companies can expect to lose some of their best talent in 2010 if they don’t create an environment that attracts top talent to stay and nurtures their development.

The recruiting process will also require improvement, like replacing the current ATS, Applicant Torture Systems, requiring multiple forms and questionnaires to be filled out online, and losing the best applicants in the process.

It should get better for hiring when the “player” candidates begin to interview, but how long will it take for them to get very picky and create a competitive environment that has swung very much in their favor? For a period of time, you will see a better quality candidate among the large quantity of resumes. After that the quantity will diminish and the competitive market will return.

The best a company can do is be prepared to take advantage as the “picky candidates” become available, by making your company attractive and the application and interview process streamlined, decisive and effective.

What is your company doing to take advantage of the changing job market and the return to normalcy?

Have you invested in building a targeted talent pool? Do you know which sources provide the highest quality candidates with a high probability of hire?

We have been watching the number of positions available at start-ups creep up by about 100 every week for the past month and a half, indicating the end of job depletion and the beginning of a return normalcy.

Our timing might be right on the money for a change. We just introduced the new job posting functionality for companies and user ability to find jobs at companies within their professional graph, as hiring increases but the need to keep costs low is still high priority.

Genotrope is a featured company at the upcoming Mass Innovation Night because our focus is Boston area emerging technology companies and entrepreneurs. One of our main features is a database of Communications, Computer, Software and Web companies presented in a Genealogical fashion. The other is a Directory of Boston Venture Capital companies. Both have proven very popular with our users.

Here is a bit about our concept.

The Genotropic approach to recruiting. geno- : genus : kind kin : a group united by a common interest or common characteristics or affinity tro-pism : a natural inclination Simply put, companies are comprised of individuals that share some common traits, goals and backgrounds. They have been attracted to their companies because of these affinities and will be inclined to move to the next company that offers them a similarly comfortable environment.

We hope to improve on the current offerings in the online job market, with an Affinity Job Search tool that focuses on matching you with companies rather than jobs. Matching culture and fit rather than buzzwords.

Community contributions will at some point overtake our editors valiant efforts to populate the company database. When that happens, we will have a micro-chunkable database of much value to the users. Stay Tuned.

Although we do a new build almost every week, today we have rolled out major new functionality.

We believe heartily in the process of “finding the company first and then the job”. But it is swimming upstream against an industry that is built around the job posting.

Candidates look for jobs and Companies want to post jobs. So instead of fighting against this fact, we have released job posting capability.

Now companies can register with Genotrope and manage their company record, post news as well as create and edit job postings.

The difference is that now when Candidates are viewing the list of job posting the Genotrope Icon will be present in the job listing to indicate companies where the candidate also has an affinity match through their professional graph. These jobs will be the better fit matches when compared to matches done strictly by position or industry.

Along with the new job postings, we have added major new search functionality. Both Browsing and MyGraph mode on the FindJobs page can be searched by zipcode proximity, Industry and Company Status. This means you can slice and dice the company database to find very specific matches, such as all B2B companies with a series A investment that are 25 miles from my home town.

One last thing, registered users will notice the new home page not only displays All Recent Job Postings, it also shows the New Jobs from Companies in your Graph.

These changes reflect the fact that the job market is picking up and Genotrope’s increased focus on helping People and Companies connect.

Now it is possible to register your company in Genotrope. Once registered, your company administrator is now the only one able to add or update information to your company page.

Registration if free and allows companies to more actively target potential candidates. We currently offer sponsorship of our home page, VC Directory and blog.

In the future we will introduce a subscription model which will include job postings.

The Talent Target page shows the list of companies connected to yours through our graphing algorithm. Users with these companies in their work history will be updated with your company’s news and jobs and receive a feed of this information.

The Hiring Target section allows your company to reach users at competitors or companies deemed to have quality potential candidates that are not in your Company’s Graph. Once added users with these companies in their work history will be updated and able to view your companies news and jobs and receive a feed of this information.

Make sure to frequently add Press or news announcements as well as jobs from your website. This will maintain a steady stream of information going out to your targeted talent pool. Add your career or job page to these links. Use the title Careers, and the link will always appear at the top of the list. Otherwise entries are in chronological order.